Detroit News reports the cash was discovered at the Sixth Grade Academy, a school of about 600 students on the 13500 block of Pine Street.
According to reports, the girl got the money from a fellow student.
"The 12-year-old apparently got the money from another child who lives across the street from her the night before," Taylor Chief of Police Mary Sclabassi said Tuesday.
Sclabassi said the case was solved quickly. Soon after the girl was caught, police took the backpack and the neighbors later retrieved the cash.
"The school district called us and said a 12-year-old student had a backpack full of money," Sclabassi said. "The principal became aware of it when she heard the student was giving money away to friends. They brought in the student, secured the backpack and retrieved the money she had given away. This is a real first for me."
Police will continue to investigate the case.